A Note on Estimating Income Inequality across countries
using PPP Exchange Rates*

Feb 1st 2018, Jayati Ghosh

The
use of exchange rates based on Purchasing Power Parities
to compare income across countries and over time has
become standard practise. But there are reasons to
believe this could lead to excessively inflated incomes
for poor countries and in some cases also inflate
the extent of real changes over time. Estimates of
gross domestic product growth in Chinese and Indian
economies in recent years provide examples of this.

*This
article was originally posted in the Economic and
Labour Relations Review on January 30, 2018.

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